- Teaches money management skills. Don't just hand your children money. Make sure you teach them what it means to save. Teach them to pay a 10% tithe and to place 10-20% away for savings. Help your child determine a goal for their savings. For example, if there is a new video game they want explain to them how much money they need to get that game. Place a picture of it somewhere where they can be reminded that that is what they are saving for. Teaching these skills when they are young can help them avoid money problems as adults.
- Avoid having them ask you for money all the time. When your children have their own money to spend and they ask you for something from the store you can just remind them they have their own money.
- Teaches children the value of money. How often do your children see you handle actual money? I know mine only see me with credit cards and checks. Giving children cash helps them see that when it is gone it is gone.
So, when should you start giving an allowance, how much should you give, and how should you do it?
Most children learn about money at school when they are around 6 years old. At this age they can better understand the concepts associated with money management. But you can start teaching the concept of paying for goods as early as 3 years.
The amount to give varies from family to family. I have heard half of their age in dollars or a dollar per year of their age. Some families can afford more while others need to stick with less. Do what is best for your family. Older children may be responsible for buying their own personal toiletry items so make sure the allowance covers the cost of those items and leaves a little extra money for spending.
How often you give the allowance depends on the age of the child. Young children should be paid weekly while older children can be paid bi-weekly or monthly to teach long term budgeting.
I personally believe you should not tie allowances to chores, at least not the chores that need to be done just because your child is a part of the family. You shouldn't pay your child to clean up the toys they left out, make their bed, put clothes away, etc. It's better to remove a privilege if they fail to do those chores. But, make a list of extra chores they can do that pay like, raking the leaves, wiping the base boards, dusting the blinds, etc.
Remember, it is better to start an allowance when the child is younger than to do it when they are a teenager because you can solidify good financial habits early.